The high court here on Monday accepted the Forward Markets Commission (FMC)’s submission that it would direct the beleaguered National Spot Exchange Ltd (NSEL) to stop honouring re-materialisation (redemption) requests of e-series investors for four weeks. The commodity derivatives markets regulator has also directed the NSEL and its subsidiary Indian Bullion Markets Association to appoint an agency to conduct forensic audit for e-series contract investments to obtain a clear picture on the entire movement of the commodities held under the NSEL’s e-series. These include 910 kg of gold, 46 tonnes of silver, 19 kg of platinum, 62 tonnes of metals such as copper, 61 tonnes of zinc, 49 tonnes of lead, and 17 tonnes of nickel, according to the audit report of Sharp & Tannan Associates. There are 33,000 investors in NSEL’s e-series contract. With Monday’s development, investors seeking financial settlement or delivery of goods under e-series will have to wait for at least four weeks till the court issues a final verdict based on the report submitted by the forensic auditor. Hearing the case jointly filed by Tarun Amarchand Jain HUF and Ashish Seth HUF, the two-judge bench comprising S J Wajifdar and K R Shriram remarked: “We do not have, at this stage, anything further to retain regarding the stand taken by the FMC. In effect, the court accepted the petitioner’s plea to safeguard investors’ from any further damage.” The ministry of consumer affairs (MCA) filed an affidavit on October 26. According to a MCA’s notification dated August 26, FMC has the power to regulate and supervise the functioning of the NSEL, including e-series.FMC has asked the NSEL to suggest names of the auditor for conducting the forensic audit, which will have to be approved by the FMC. The court observed that the FMC should take a consent from the petitioner on the appointment of the auditor. Till recently, NSEL had received 65 requests from investors for rematerialising gold and silver under e-series contract worth Rs 1 crore. On rematerialising Sahara’s 234-kg of gold, the court preferred not to intervene as the matter was under the supervision of the Securities and Exchange Board of India.

According to sources, Sebi has frozen Sahara’s e-series holding proceeds. The court ordered NSEL to bear the expenses of the forensic audit from its active account. The court categorically ordered NSEL not to disburse auditor’s fee from either escrow account, investors’ protection fund or the settlement guarantee fund. Meanwhile, police custody of NIlesh Patel, managing director of NSEL’s largest defaulter NK Proteins, has been extended till October 31. He was arrested last week.